Old stand-bys in alcoholic drinks are increasingly facing challenges from alternative products across Latin America.
BY MARY TABION
Beverages with long-standing traditions, such as lagers and spirits such as brandy, aguardiente and cachaça, will likely maintain their strong positions within the region, but lighter drinks and new flavors are catching on with younger consumers influenced by global brands and trends. In 2005, 18-34 year-olds accounted for 29 percent of the population in Latin America and the Caribbean, and as a percentage of the total population for the region is expected to hold steady through 2015.
Beer, a refreshing favorite in hot climates, is forecast to show the strongest growth by 2011 with volumes expected to soar 20 percent. Lower prices compared with wine and spirits are behind the surge, but regional and local brewers are also working to expand beer’s appeal across age groups and both genders. Brews with lower calories, smoother taste and lighter flavors have become commonplace in Latin America since the 1990s. Brewers are taking the light beer concept further, repackaging their products with a younger image. Grupo Modelo in Mexico has taken this approach with its Modelo Light Azul brand, changing from a white to blue bottle and targeting younger consumers through novelty through the slogan, “Beer like you’ve never imagined it.” Bavaria in Colombia developed its Brava brand to have a less filling, refreshing taste. Brava’s television advertising features a dance party at a nightclub and a contest where specially marked bottle caps revealed cash prizes using the theme “The party pays you.”
Global beer industry mergers have not left Latin American markets unscathed. SABMiller’s fusion with Colombia’s Bavaria in 2005 may pave the way for more international brands to enter the region. Peroni Nastro Azurro was the first international brand to be launched in Colombia post-merger, backed by a strong marketing campaign that included a fashion show featuring Italian designers. Stella Artois, was launched in Brazil and Argentina in 2005 as part of InBev’s ongoing expansion in Latin America after buying out Brazil-based AmBev. The introduction of Stella Artois in Argentina was particularly notable because of the use of non-returnable bottles, which makes the import more accessible to cost-conscious drinkers.
Latin American brewers have gone on the offensive to defend their market share from imports and premium brands. While lagers claim the lion’s share of the beer market in Latin America, brewers are experimenting with other beer formats, introducing the local palate to European varieties that formerly had a marginal presence in the region. Ales are quickly carving out a niche in Chile through Compañía Cervecerías Unidas’s creation of the Cristal Red Ale brand in 2006. Cristal Red Ale’s price point is considerably lower than imported ales, and benefits from the strength of CCU’s distribution network and nationwide promotions. Femsa Cerveja Brasil launched Kaiser Gold in 2006, positioning it as a premium-beer with a lower price than the company’s Bavaria Premium.
FLAVORS SPICE UP SPIRITS
International brands are pushing their way onto retail shelves and bartenders’ arsenals. Multinationals are increasingly offering their premium product portfolios and including Latin America in global product launches rather than waiting to test the products in more affluent markets in North America and Western Europe. Bacardi-Martini employed this strategy in Brazil during 2005, bringing premium global brands like Bombay Sapphire and Grey Goose to the market. Diageo’s introduction of Johnnie Walker Green Label in Chile in 2005 is an example of a super-premium brand gaining wider global coverage.
Brand extensions and flavor variants are another global trend making its way through Latin America. Flavored rums and vodkas, in particular, have been heavily promoted. Younger consumers have responded favorably, since flavored spirits can be mixed into cocktails or combined with energy drinks. Pernod Ricard brought its full Wyborowa flavored vodka line to Chile in July 2006, which includes apple, pear, orange, and lemon, as well two more exotic varieties: rose and almond. Bacardi-Martini launched its flavored rum range in Chile in 2006—with brands like Bacardi Big Apple, Bacardi O (orange), Bacardi Coco, and Bacardi Big Razz (raspberry).
Local distillers have not abandoned the local market in the face of international competition. National specialties have undergone a facelift in order to remain relevant for today’s younger drinkers. Aguardiente, Colombia’s anise-flavored spirit, has been reincarnated with a softer taste. Empresa de Licores de Cundinamarca developed its Nectar Club and Nectar Azul sugar-free brands with a younger demographic in mind, launching the reformulated aguardientes in 2005. Fábrica de Licores del Tolima and Industria Licorera del Valle also began to produce sugar-free aguardientes in 2005 under the brands Tapa Roja Special and Blanco del Valle sin Azucar. Fábrica de Licores del Tolima also launched a low-alcohol aguardiente Tapa Roja Ice in the same year.
RTDs KEEP TRADTIONAL COCKTAILS CURRENT
Ready-to-drinks (RTDs) and soft spirits, relatively new formats within alcoholic drinks, have emerged as a segment almost exclusively targeted at young drinkers. These alcoholic drinks are primarily spirit-based, and are positioned as a beverage for individuals who seek a “softer” drink without the bitter taste that often accompanies beer or spirits. Global brands like Diageo’s Smirnoff Ice have a presence in Latin America, but local and regional brands abound, featuring tropical fruit flavors or local spirits. For example, pre-mixed pisco sours in Chile dominate fast-growing soft spirits. All of the major pisco producers (Cooperativa Agrícola Control Pisquero Ltda, Pisconor SA, and Cooperativa Agrícola Pisquera de Elqui Ltda) have introduced pre-mixed pisco sours offering convenience for a younger generation that is open to a bottled version of the national cocktail. A similar phenomenon can be observed in Brazil, where Diageo’s Caipiroska Smirnoff and Indústrias Reunidas de Bebidas Tatuzinho / 3 Fazendas Ltda’s Caipirinha Velho Barreiro, provide a quick fix for the caipirinha.
DEVELOPING WINE CONNOISSEURS
While Argentina and Chile are the first countries to be associated with wine in Latin America, the region as a whole is beginning to take another look at wine. With local wine consumption down, Argentina and Chile turned to exporting their vintages, primarily to North America and Europe, and have recently started to improve the quality and quantity of offerings to their neighbors in the region. At home and abroad, Argentina and Chile are working to dispel their image as bargain wine producers and are trading up their packaging and marketing to convey a more upscale message. Viña Concha y Toro, Viña Santa Rita, and Viña San Pedro in Chile and Peñaflor and Valentín Bianchi in Argentina are examples of wineries that have developed products to trade consumers up from table wines to fine wines. These companies have broad product portfolios, which allow consumers to select wine at any price, ranging from inexpensive table wines in aseptic brick packaging to fine reserve wines.
Red wines far outweigh whites and rosés in terms of volume sales in Latin America. Wine producers and importers are working together to cultivate Latin Americans’ developing interest in wines. Wine tastings and cooking classes featuring wine and food pairings are increasingly used as venues to promote wine as mainstream drink across the region.
Mary Tabion is the Latin America Research Manager for Euromonitor International. This article was written for Latin Business Chronicle.